Question

A producer received Rs.6.000 when the price of a commodity was Rs.60 per unit. The receipts increased to Rs. 8,400 when the price increased by Rs.10 .Calculate elasticity of supply?​

Answer 1

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Answer 2

Given - Original receipts - Rs. 6000

Original cost per unit - Rs. 60

New receipts - Rs. 8400

New cost per unit - Rs. 70

Find - Elasticity of supply.

Solution - Original Quantity of goods - 6000/60 - 100 units.

New quantity of goods - 8400/70 - 120 units.

Formula for elasticity - (∆Q/Q)/(∆P/P). In the formula, (∆Q/Q) are change in quantity and original quantity and (∆P/P) are change in price and original price.

Keeping the values in equation-

Elasticity - (20/100)/(10/60)

Elasticity - (20*60)/(10*100)

Elasticity - 1200/1000

Elasticity - 1.2.

Thus elasticity is 1.2.